lesson 17

Question 1

agency law

Answer 1

deals with the rights and responsibilities that are created when one half acts on behalf of another. also deals with whether or not an agency relationship exists.

Question 2

principal

Answer 2

the person that has another person acting for them

Question 3

agent

Answer 3

person that is acting for someone else

Question 4

what is required to create an agency relationship?

Answer 4

1. principal
2. agent
3. parties must mutually agree that agent acts on behalf of principal
4. agent will be subject to principal’s control
5. thus, creating a fiduciary relationship

Question 5

consent

Answer 5

same as with contract law, it is an agreement for the agent to act on behalf of the principal

Question 6

Terry drove down the highway and struck a vehicle on the side of the highway, killing the owner. Terry called his lawyer Dave and asked him what to do. Dave told him to meet at the hospital and give a blood sample. Test results showed levels of cocaine, prosecutor charged Terry with manslaughter and sought to introduce the test results at trial. Dave argued the hospital was his agent, and attorney client privilege prevented prosecutor from using test results. What happenen?

Answer 6

courts will rule that hospital had not consented to an agency relationship and therefore was not an agent, could use test results at trial

Question 7

control

Answer 7

principal exercises control over agent, as a result they are responsible or liable for acts of the agent

Question 8

fiduciary relationship

Answer 8

based on trust, the beneficiary places confidence in the fiduciary who is obliged to act in good faith and do what is in the best interest of the beneficiary

Question 9

the fiduciary cannot

Answer 9

act in his own best interest over that of his beneficiary. he has a fiduciary duty to his principal

Question 10

what is not required for an agency relationship

Answer 10

1. written agreement
2. formal agreement - law only requires that they act like a principal and agent
3. compensation

Question 11

exception to no written agreement requirement

Answer 11

equal dignities rule

Question 12

equal dignities rule

Answer 12

when the agency relationship is to perform a task that must be in writing, the agency relationship must also be in writing (real estate transactions)

Question 13

duties that agent has to principal

Answer 13

1. duty of loyalty
2. duty to obey instructions (unless illegal)
3. duty of care
4. duty to provide information

Question 14

duty of loyalty

Answer 14

agent may not engage in self dealing or act for his own benefit, also includes not secretly dealing with principal or engaging in inappropriate behavior

Question 15

book publishing company hires Sadie as their agent to find up and coming authors that they might sign to do their publishing. Sadie has been working on her own book and wants to get it published

Answer 15

under her duty of loyalty, sadie cannot sign herself to the company

Question 16

duty of care

Answer 16

agent has the duty to act with reasonable care under the circumstances. if the agent has special talents or skills, they have to act with a higher standard in conformity with those skills

Question 17

what remedies does principal have against agent who fails in any of their duties?

Answer 17

1. damages - may sue for damages
2. profits - if agent breaches duty of loyalty and benefits from it, principal may sue for those profits
3. rescission - principal may rescind or cancel a contract/agreement that agent wrongfully entered

Question 18

duties of principals to agents

Answer 18

1. duty to compensate if required by agreement
2. duty to indemnify
3. duty to cooperate

Question 19

principal has to pay agent unless it is a

Answer 19

gratuitous agency

Question 20

duty to indemnify

Answer 20

principal has a duty to indemnify the agent for any reasonable expenses incurred by the agent as part of his duties

Question 21

3 categories of expenses for duty to indemnify

Answer 21

1. ordinary expenses and damages - simply reimbursing agent for costs paid (gas needed to drive somewhere)
2. certain tort claims to 3rd parties - duty to indemnify an agent against a 3rd party if claim is based on agent’s behavior and agent did not realize he was committing a tort
3. certain contracts - principal must indemnify the agent against 3rd parties as a result of entering into a contract on principal’s behalf

Question 22

certain tort claims to 3rd parties

Answer 22

william owns 7 of 8 trailers on a street, hires Fred to clean them out, doesn’t tell Fred he doesn’t own the 8th. Fred cleans them all, owners of the 8th return to find an empty trailer and sue Fred. william has a duty to indemnify Fred for any loss sustained in the lawsuit

Question 23

duty to indemnify - certain contracts

Answer 23

carter hires donald to purchase tennis racquets, they arrived and were wrong. Carter refuses to pay, Wilson sues donald on the contract, donald lost and sues carter. carter owes a duty to indemnify donald.

Question 24

3 main components of duty to cooperate

Answer 24

a. principal must furnish agent with opportunity to work
b. principal cannot unreasonably interfere with agent’s ability to accomplish his task
c. principal must perform his part of the contract if any

Question 25

principals are ordinarily liable to

Answer 25

3rd parties for the acts of their agents whether they involve contracts or torts

Question 26

principles are liable for the contracts their agents enter into with 3rd parties provided

Answer 26

the agent had authority or the principal ratified the contract

Question 27

express authority

Answer 27

the principal grants express authority by words or conduct that, reasonably interpreted, causes the agent to believe the principal wants him to act on his behalf

Question 28

implied authority

Answer 28

the agent's authority to engage in a contract with a 3rd party includes any other acts that are reasonably necessary to accomplish it. the agent's authority to do the other acts is implied

Question 29

apparent authority

Answer 29

the principal is liable to a 3rd party even when the agent does not have authority to engage in a certain activity if the agent reasonably believes that the agent is authorized, or if it is apparent to the 3rd party

Question 30

James is a stock broker with Goldman. he gives a seminar at Goldman to 50 potential investors, and handed out brochures with stocks he recommended. one of the investments was a stock that was not registered and G did not recommend or follow it. one of the potential investors signed with James and invested in the stock, it crashed shortly after and the investor sued

Answer 30

the courts would hold that Goldman as the principal was liable to the 3rd party even though James did not have express or implied authority to sell the stock, but to the 3rd party, James had apparent authority

Question 31

respondeat superior

Answer 31

let the master answer

Question 32

general rule for principal's liability for negligent physical torts

Answer 32

a principal is liable for physical torts negligently committed by an employee (agent) acting within the scope of his employment

Question 33

the issue of liability is determined based on

Answer 33

the classification of the agent

Question 34

if the agent is an employee

Answer 34

the principal is liable

Question 35

if the agent is an independent contractor

Answer 35

the principal is not liable

Question 36

how do courts determine what class the agent is

Answer 36

they look to the amount of control the principal has over the agent. more control = more employee

Question 37

things courts consider when determining an agent's class

Answer 37

1. whether the principal supervises details of the work 2. whether the principal supplies the tools and place of work 3. whether the agent works full time for the principal 4. whether the agent receives a salary or hourly wages, not a fixed price for the job 5. whether the work is part of the regular business of the principal 6. whether the principal and agent believe they have an employer-employee relationship 7. whether the principal is in business